THE BLOG

Can Care Markets Work For Families?

30/08/2017 15:26 BST | Updated 30/08/2017 15:26 BST

As summer ends, the news is of children's nurseries and older people's care homes facing closure.

The reason is simple - state funding for a place at a nursery or a care home is inadequate and providers are saying enough is enough.

It begs the age old question. If care and childcare are public goods, can we make the markets in care work fairly for families that need care?

It is of course a hugely political question.

The government wants to extend free childcare for three and four year olds to thirty hours a week from September. And this autumn the government is due to publish a green paper on the future funding of care for older and disabled people.

In the meantime the Labour Party has said it will invest substantially more in both childcare and adult care and end the privatisation of care.

Are we at a tipping point for care markets? Can government interventions make mixed markets work for families? Or should the provision as well as the funding of care rest with the state?

With growing demand for both childcare and eldercare, families urgently need answers.

Market intervention comes in many forms - from regulation to direct provision - but the key focus has been on subsidies, particularly for families on lower incomes.

On the face of it, free childcare for thirty hours a week for the three and four year old children of working parents seems a very attractive offer. It could eliminate the costs of childcare for many of these families.

But the problem rests with the rate at which government through local authorities is funding childcare providers to deliver the free thirty hours. The hourly rate is not sufficient to cover the basic and rising costs of provision, let alone the provision of quality care.

Nurseries offering this free care will have little opportunity to cross-subsidise it by providing additional hours of care to these families, given that 30 hours will meet most families' needs.

The response from nurseries has been mixed. Some will struggle on, some will close, some will stop offering the free childcare for three and four year olds, restrict the number of free places or charge for 'extras', and some will re-shape their offer towards children under three whose parents can pay the going rate, with the help of the new childcare tax break.

But this market response means that lower income parents will struggle to pay for childcare for children under three and in many areas there will not be sufficient free places for three and four year olds.

Meanwhile the cuts in local authority funding for social care mean that the fees paid by councils for care home places have not kept pace with the rising costs of providing quality care. Some homes no longer provide state-funded places while others cross-subsidise state-funded residents with higher fees for self-funded residents.

Again this is causing the emergence of a two tier system depending on who pays, and providers say more care homes will close.

The problems facing childcare and eldercare are remarkably similar. And the solutions seem similar too. Without substantial extra funding from central government, the crises in childcare and eldercare will only worsen and families will increasingly be expected to fund their own care.

As well as more funding, what else could be done? As the New Economics Foundation points out in a new report on transforming care in the West Midlands, care should be seen as a key economic and employment driver, spurred on by innovative models of community-based care.

The same could be argued for childcare and indeed the emerging care-home nursery co-location of care.

Underpinning this remains the question: should care be a 'for profit' part of our economy? At the moment too much of the scarce resource in both sectors seems to be syphoned off into profit, while too many families don't get the services they need.

A radical review of the economics of childcare and eldercare is long overdue.